What is the Iron Triangle and Why Does it Matter?
At some point in your life, you may have heard the phrase, “you can have it good, you can have it fast, or you can have it cheap, but you can only pick two.” This is technically called the Iron Triangle and it’s a common framework in project management used to visualize the 3 biggest constraints that will impact any major business venture. However, it’s also a great financial lesson that can apply to almost any major purchase. This past weekend, my 9 year old daughter got her first lesson in the Iron Triangle.
It all started a couple weeks ago when we realized she had outgrown her old bike and needed the next size up. The weather is finally warming up here in Ohio and she was itching (ok, begging) to start biking to school again with her friends.
A brand new bike that had all the features and specs that we wanted was going to be at least $400-$500. This seemed crazy to me for a bike that she’ll ride for a couple of years at the most before needing to upgrade yet again.
Our next stop was Facebook Marketplace and we got really lucky. We found someone selling the exact same brand of bike that was in the store and they were just a few miles away. It was $100 for the bike but the housing for the gear shifter was totally broken and the handlebar grips were a mess. Other than that, the rest of the bike was in great shape and it was even her favorite color, red - we were sold!
From the minute we got the bike home she was begging to ride it, but it still needed a lot of work and repairs. While my husband is very handy and likes to take on DIY projects such as this, patience can be hard to muster in a 9 year old. It was time to have another conversation with the kids about trade-offs.
The Iron Triangle is a simple business concept, but it can apply to so many different situations and decisions, including this weekend with the bike. While Dad worked on the bike, I talked to the kids about the different scenarios and where they fell within this triangle:
Brand new bike from the store: This would be a very fast option as the bike could be purchased and ready to ride all in the same day, and the quality would certainly be the best as it’s brand new. However, this option is definitely not cheap!
Used bike: This is a much more affordable option, and we were able to pick it up right away, but the quality was not so great - yet. It was good enough to get from point A to point B, but not being able to shift the gears was a pretty big problem.
Used bike + new parts + manual labor: Less expensive than a new bike, but it still required purchasing a few new parts. New parts meant that it would ride just as well as a new bike. However, it took my husband nearly 3 hours to make all the repairs plus the time it took to order the parts and wait for them to arrive - not fast.
It was a short conversation, but it felt like a great opportunity to not only introduce the kids to this idea of the “Iron Triangle,” but to reinforce the idea of trade-offs. Almost all decisions in life come with trade-offs. As kids get older, the decisions they have to make get bigger and the trade-offs more significant. Teaching kids early on about concepts like the Iron Triangle will give them a solid framework to help them evaluate decisions rather than just relying on their gut.
It’s never too early to teach your kids about trade-offs, cost-benefit analyses, or any other basic business concept because most business skills are also great life skills!